This week, the Senate will hold hearings on rising oil and fuel prices and the subsequent record earnings recently posted by U.S. oil companies. Some lawmakers have suggested that these profits are unseemly and, thus, should be subject to a new windfall profits tax.

Before rushing to create a new federal tax, lawmakers should ask two questions:

(1) Do oil companies currently pay too little in taxes compared to profits?
(2) What was the effect of the last windfall profits tax enacted in 1980?

The answer to the first question is that over the past 25 years, oil companies directly paid or remitted more than $2.2 trillion in taxes, after adjusting for inflation, to federal and state governmentsincluding excise taxes, royalty payments and state and federal corporate income taxes. That amounts to more than three times what they earned in profits during the same period, according to the latest numbers from the Bureau of Economic Analysis and U.S. Department of Energy.

These figures do not include local property taxes, state sales and severance taxes and on-shore royalty payments.

The answer to the second question, according to the Congressional Research Service (CRS), is that the 1980s windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil.1

CRS also found the windfall profits tax had the effect of decreasing domestic production by 3 percent to 6 percent, thereby increasing American dependence on foreign oil sources by 8 percent to 16 percent. A side effect was declining, not increasing, tax collections. Figure 1 clearly shows that while the tax raised considerable revenue in the initial years following its enactment, those revenues declined to almost nothing as the domestic industry collapsed.

This week, the Senate will hold hearings on rising oil and fuel prices and the subsequent record earnings recently posted by U.S. oil companies. Some lawmakers have suggested that these profits are unseemly and, thus, should be subject to a new windfall profits tax.

Before rushing to create a new federal tax, lawmakers should ask two questions:

(1) Do oil companies currently pay too little in taxes compared to profits?
(2) What was the effect of the last windfall profits tax enacted in 1980?

The answer to the first question is that over the past 25 years, oil companies directly paid or remitted more than $2.2 trillion in taxes, after adjusting for inflation, to federal and state governmentsincluding excise taxes, royalty payments and state and federal corporate income taxes. That amounts to more than three times what they earned in profits during the same period, according to the latest numbers from the Bureau of Economic Analysis and U.S. Department of Energy.

These figures do not include local property taxes, state sales and severance taxes and on-shore royalty payments.

The answer to the second question, according to the Congressional Research Service (CRS), is that the 1980s windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil.1

CRS also found the windfall profits tax had the effect of decreasing domestic production by 3 percent to 6 percent, thereby increasing American dependence on foreign oil sources by 8 percent to 16 percent. A side effect was declining, not increasing, tax collections. Figure 1 clearly shows that while the tax raised considerable revenue in the initial years following its enactment, those revenues declined to almost nothing as the domestic industry collapsed.

Lmao....Obama is clueless...

Click to expand...

Obama's tax plan....
Democratic presidential hopeful Barack Obama today called for a windfall profits tax on oil companies, which he said would be used to ease the burden of rising energy costs on poor and middle-class Americans.

"It isn't right that oil companies are making record profits at a time when ordinary Americans are going into debt trying to pay rising energy costs," he said. "That's why we'll put a windfall profits tax on oil companies and use it to help Indiana families pay their heating and cooling bills and reduce energy costs".

funny, when oil was around 20/bbl i didn't hear anything about windfall...so now that world oil prices have skyrocketed, the socialists of this country want to steal those profits caused not by the oil companies themselves, rather world market conditions -- as punishment for making a profit.

yay, i can't wait till he taxes LOTTO winnings at 90% because they are a windfall profit, then we shall see the libs rise up in anger

funny, when oil was around 20/bbl i didn't hear anything about windfall...so now that world oil prices have skyrocketed, the socialists of this country want to steal those profits caused not by the oil companies themselves, rather world market conditions -- as punishment for making a profit.

yay, i can't wait till he taxes LOTTO winnings at 90% because they are a windfall profit, then we shall see the libs rise up in anger

Click to expand...

It seems like the liberal's solution for everything is raising taxes. They fail to realize in a lot of cases, by raising taxes, you actually decrease tax revenues.

You can raise taxes on profits if you want, but that won't happen in a vacuum. Companies will change their pricing strategies accordingly, and any increased tax burden will ultimately be paid by the consumers.

You can raise taxes on profits if you want, but that won't happen in a vacuum. Companies will change their pricing strategies accordingly, and any increased tax burden will ultimately be paid by the consumers.

Click to expand...

Isn't everything ultimately paid for by the consumer anyway? I've never understood why so many businesses get tax breaks. Why not make the tax rate equal for all, then we wouldn't have to worry about enacting windfall taxes.

funny, when oil was around 20/bbl i didn't hear anything about windfall...so now that world oil prices have skyrocketed, the socialists of this country want to steal those profits caused not by the oil companies themselves, rather world market conditions -- as punishment for making a profit.

Click to expand...

dude the more i read this, the more i almost have to think it's a joke if it weren't for you other posts showing it fits with your overall worldview ...but then again most of your posts appear to be well thought out.

are you familiar with the concept of windfall?

lordy lordy

duh...of course there wouldn't there be calls for a windfall tax when oil was 20 bucks a barrel??? that's pretty much the point of a windfall tax...

um and then yurt you say the oil campanies haven't done a dam thing to deserve the profits that it all because of the market.

hello...if one was going to do a windfall tax...that sure sounds like the perfect place for one.

Isn't everything ultimately paid for by the consumer anyway? I've never understood why so many businesses get tax breaks. Why not make the tax rate equal for all, then we wouldn't have to worry about enacting windfall taxes.

Click to expand...

actually this was part of Hillary's plan for the gas tax holiday.

the economics of it goes like this.

supply of oil is static in the short term...it can't be changed...the oil rigs are all going at full steam currently. yeah, the long term with price changes more oil could be brought on, but not in the short term.

thus the price is dependent on demand...and the price will rise to what consumers will pay...which is why it was pandering to go with the gas tax holiday.

since any reduction in the price brought on by the gas tax holiday would be gobbled up the suppliers who would simply increase the price to the point where demand equals supply.

The windfall profit tax on the other hand. Hits the suppliers before it hits the consumers.

Since the price already determined by demand they can't in the short term pass that tax on to consumers.

sorry but this socialist has a much better understanding of econ than most naive capitalists.

Useful Searches

About USMessageBoard.com

USMessageBoard.com was founded in 2003 with the intent of allowing all voices to be heard. With a wildly diverse community from all sides of the political spectrum, USMessageBoard.com continues to build on that tradition. We welcome everyone despite political and/or religious beliefs, and we continue to encourage the right to free speech.

Come on in and join the discussion. Thank you for stopping by USMessageBoard.com!